Economic activity in the services sector (formally the non-manufacturing sector) grew in July for the second month in a row, according to the latest Services Institute for Supply Management Report On Business.

“The Services PMI registered 58.1 percent, one percentage point higher than the June reading of 57.1 percent. This reading represents growth in the services sector for the second straight month after contraction in April and May, preceded by a 122-month period of expansion,” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the ISM services business survey committee. “The supplier deliveries index registered 55.2 percent, down 2.3 percentage points from June’s reading of 57.5 percent. Supplier deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases. The higher readings for supplier deliveries in the three months prior to June were primarily a product of supply problems related to the coronavirus (COVID-19) pandemic. Supplier deliveries are now more closely correlating to the current supply and demand.

“The prices index figure of 57.6 percent is 4.8 percentage points lower than the June reading of 62.4 percent, indicating that prices increased in July at a slower rate. According to the Services PMI, 15 services industries reported growth. The composite index indicated growth for the second consecutive month after two months of contraction. The sector’s previous period of contraction was for two months in 2009: November (with a Services PMI of 49.5 percent) and December (with a Services PMI of 49.7 percent). Respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen. Sentiment varies across industries as they are impacted differently.”

Fifteen service industries reported growth in July, including real estate, rental and leasing, finance and insurance, and transportation and warehousing. The three industries reporting a decrease in July were other services, mining, and professional, scientific and technical services.

What Respondents are Saying

• “Sales have remained strong in homebuilding. We are experiencing longer lead times for lumber, interior trim components, appliances and light fixtures. Lumber prices are near all-time highs as lumber mills have yet to increase capacity as demand has increased.” (Construction)
• “We’re still not certain whether or not the students will be coming back in their full capacity due to COVID-19. This has caused an influx of ordering safety supplies to prepare for the possibility. We have certainly increased our purchasing in the past month or so by a large amount.” (Educational Services)
• “COVID-19 posture continues, with some 95 percent of the company workforce working remotely.” (Finance and Insurance)
• “Surgical services still only scheduling at 50 percent capacity. Raw material shortages worldwide affecting ability to get finished PPE (iso gowns, bouffant caps, shoe covers).” (Healthcare and Social Assistance)
• “Overall positive, but cautious outlook with oil prices stabilizing in the midst of the pandemic spiking again in our region. Our company has begun to put mitigation procedures in place to bring workers back to the office despite the lingering pandemic.” (Management of Companies and Support Services)
• “Some business picking up but mostly virtual meetings, training and consulting. Time will tell if it’s profitable. The economic situation is quite dire regionally, so there is no telling if this is a trend or just a short respite. Any business at this point is much appreciated.” (Professional, Scientific and Technical Services)
• “Phased opening of businesses continues at a slow pace. Spending is down. Unemployment is up this year, though down compared to last month. Unemployment last year was 2.9 percent. Last month, it was 19.2 percent. This month, it is 16.2 percent.” (Public Administration)
• “COVID-19 interruptions are changing the way business is done.” (Real Estate, Rental and Leasing)
• “Retail sales have continued to increase month over month, likely due to the general reopening of the economy. Mask mandates have been put in place for almost every market we operate in, causing an increased need for supply of masks for employees and customers.” (Retail Trade)
• “Orders and business activity are back to pre-pandemic levels. Previously stalled projects are starting back up.” (Utilities)